When preparing a legal opinion which could apply to more than one entity with a joint interest, a good phrase for attorneys to keep in mind is “All for one, and one for all!” In a recent decision from the New York Supreme Court in a billion-dollar case, a plaintiff was able to “share” the attorney-client privilege protections with a formerly affiliated entity due to the testimony of attorneys and clients that this was the expectation.
In BML Props. Ltd. v China Constr. Am., Inc., Index No. 657550/2017, 2021 NY Slip Op 31798(U) (Sup. Ct. NY Cty. May 26, 2021, J. Borrok), plaintiff BML Properties Ltd. (“BMLP”) sought, and was granted, a protective order regarding two legal opinions/valuations (the “Legal Opinions”) analyzing the potential legal claims of non-party Baha Mar Ltd. (“BM”) against the defendants. BMLP argued that it shared the attorney-privilege protections with BM either as a joint client or due to a common legal interest.
In the underlying action, BMLP alleged that the defendants, as successors in interest or as alter egos to one another, defrauded it with regard to a timely completion of a resort in the Bahamas (named “Baha Mar”), which resulted in a nearly $1 billion loss to BMLP in equity investment in the project and expected profits.
However, BM was the entity provided the Legal Opinions to analyze its potential claims against the defendants, along with potential counterclaims the defendants might have had. BM did have a corporate affiliation with BMLP (BMLP was the majority investor and voting shareholder in BM and was the “day-to-day manager” of BM) at the time of the Legal Opinions, but that affiliation was severed when BM went into receivership.
The defendants sought to use the Legal Opinions against BMLP and argued that they were prepared solely for BM and therefore BMLP cannot assert privilege. The Court flatly disagreed.
The key evidence of the shared privilege was two attorney affidavits stating that they prepared the Legal Opinions for both BM and BMLP, along with two BMLP officers saying the same thing. Where the lawyers and client all agreed on the scope of the representation, and there was no waiver, the Court reasoned, there was “simply no question” concerning the joint privilege. The Court also found it was a non-starter that the information in the Legal Opinions was “at issue” in this matter. (1)
Therefore, when preparing legal opinions for multiple potential entities, even if related, it is best to always have all of the parties – and counsel — make clear at the outset their collective understanding that the representation and the opinions are to apply to all of the relevant parties, so that in the event only one entity brings suit, an opinion for one is still an opinion for any and all.
As a side note, BML Props. Ltd. also ordered defendants to disclose their ESI search terms and noted that if the terms were to remain secret the requesting party would be unfairly prejudiced in its ability to request supplemental search terms and review whether the searches were properly done. Therefore, this case is also useful for language to argue that a recalcitrant party should proceed with transparency in e-discovery.
Mr. Barnes, a member of Barnes & Barnes, P.C. in Melville
(where he focuses upon Commercial Litigation) can be reached at LKB@BarnesPC.com
(1) Pursuant to the “at issue” doctrine, an otherwise privileged communication is waived when a party places the subject matter of advice “at issue.” Orco Bank, N.V. v Proteinas Del Pacifico, S.A., 179 A.D.2d 390, 577 N.Y.S.2d 841 (1st Dep’t 1992). Under the “at issue” doctrine, a party that places legal advice or other privileged facts or communications at issue is deemed to have waived any privilege with respect to such facts or communications and can be compelled to produce the same. The doctrine applies when a party, through affirmative acts, places privileged material at issue and has selectively disclosed the otherwise privileged advice. Determining waiver of attorney-client privilege requires careful analysis of facts and circumstances regarding whether a party actually placed otherwise confidential communications “at issue.” See Deutsche Bank Trust Co. of Americas v Tri-Links Inv. Trust, 43 A.D.3d 56, 837 N.Y.S.2d 15 (1st Dep’t 2007); American Re-Insurance Co. v U.S. Fidelity & Guar. Co., 40 A.D.3d 486, 837 N.Y.S.2d 616 (1st Dep’t 2007).